Primary market

Primary market

The primary is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus.

Features of primary markets are:

* This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called New Issue Market (NIM).
* In a primary issue, the securities are issued by the company directly to investors.
* The company receives the money and issues new security certificates to the investors.
* Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business.
* The primary market performs the crucial function of facilitating capital formation in the economy.
* The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as ‘going public’.

Methods of issuing securities in the primary market are:

* Initial public offering,
* Rights issue (for existing companies), and
* Preferential issue.

ee also

*Initial public offering
*Investment banking
*Secondary market


Wikimedia Foundation. 2010.

Игры ⚽ Нужен реферат?

Look at other dictionaries:

  • primary market — Market of new issues of securities. Chicago Board of Trade glossary The issuance ( sale) of new securities. As distinguished from the secondary market. American Banker Glossary Where a newly issued security is first offered. All subsequent… …   Financial and business terms

  • primary market — n: the market in which newly issued securities are sold compare secondary market Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. primary market …   Law dictionary

  • Primary market — The first buyer of a newly issued security buys that security in the primary market. All subsequent trading of those securities is done in the secondary market. The New York Times Financial Glossary * * * primary market primary market ➔ market1 * …   Financial and business terms

  • Primary Market — A market that issues new securities on an exchange. Companies, governments and other groups obtain financing through debt or equity based securities. Primary markets are facilitated by underwriting groups, which consist of investment banks that… …   Investment dictionary

  • primary market — noun 1. : a wholesale market large enough to dominate the trade in some goods over a large area 2. : primary point …   Useful english dictionary

  • primary market — The market into which a new issue of securities is launched. Compare: secondary market …   Accounting dictionary

  • primary market — The market into which a new issue of securities is launched. Compare secondary market …   Big dictionary of business and management

  • primary market — /ˌpraɪməri mɑ:kɪt/ noun a market where new securities or bonds are issued. Also called new issue market …   Dictionary of banking and finance

  • primary market — noun The part of the financial markets that deals with the issuance of new securities. See Also: secondary market …   Wiktionary

  • Primary Market — (первичный рынок) рынок, на котором активы продаются лицом, создавшим эти активы …   Ипотека. Словарь терминов

Share the article and excerpts

Direct link
… Do a right-click on the link above
and select “Copy Link”